The pound sterling persists to wilt as the market dumps the currency before year-end. Sterling had been simply the worst-performing G10 foreign currency yet again on Wednesday due to a downward modification in final third quarter GDP data.
The Office of National Statistics modified Q3 GDP to +0.7% quarter over quarter from the prior +0.8% reading which was enough to send the pound to a nearly 100 pip slide. GBP/USD dropped under the 200-day moving average the first time since September. The Bank of England minutes failed to move the market in spite of a slight bias toward rising rates. The minutes disclosed a three-way split for the 3rd sequential month, as predicted.
Seven from the nine MPC members elected for no change in financial policy while Andrew Sentance voted to elevate rates and Adam Posen elected to boost bond acquisitions. The complete tone of the minutes encouraged that voters are shifting towards Sentance’s side. “Most of those members considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards,” the minutes said.
The Swiss franc goes on to outperform as it was the best G10 performer one more time. The fundamentals drivers of the current rally in CHF are uncertain and flows may perhaps be driving the move. The likelihood, nonetheless, that there is a deep underlying requirement for francs should not be eliminated. We believe that the long-term sovereign issues in the euro region will justify a bid for the CHF as a safe place throughout the year ahead.
The top news from The United States on Wednesday was an upward revising to 3rd quarter GDP to an annualized pace of 2.6% from 2.5%. This was viewed as a disappointment, nevertheless, because economists had been anticipating a modification to 2.8%.. The suddenly lesser reading came due to a downward revision in individual usage from 2.8% to 2.4%. The slowing consumer spending is a negative signal for holiday spending. Inflationary information inside the report continues to support the Federal Reserve’s case for QE2. Core prices rose at a 0.5% annualized pace, the slowest since record-keeping commenced in 1959.
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